Correlation Between Brompton European and UnitedHealth Group

Can any of the company-specific risk be diversified away by investing in both Brompton European and UnitedHealth Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Brompton European and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brompton European Dividend and UnitedHealth Group CDR, you can compare the effects of market volatilities on Brompton European and UnitedHealth Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Brompton European with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton European and UnitedHealth Group.

Diversification Opportunities for Brompton European and UnitedHealth Group

-0.3

Correlation Coefficient

Brompton European  UnitedHealth Group

Very good diversification

The 3 months correlation between Brompton and UnitedHealth is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and UnitedHealth Group CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group CDR and Brompton European is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Brompton European Dividend are associated (or correlated) with UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group CDR has no effect on the direction of Brompton European i.e., Brompton European and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Brompton European and UnitedHealth Group

Assuming the 90 days trading horizon Brompton European is expected to generate 1.1 times less return on investment than UnitedHealth Group. But when comparing it to its historical volatility, Brompton European Dividend is 1.24 times less risky than UnitedHealth Group. It trades about 0.03 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,857  in UnitedHealth Group CDR on September 2, 2024 and sell it today you would earn a total of  44.00  from holding UnitedHealth Group CDR or generate 1.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Brompton European Dividend  vs.  UnitedHealth Group CDR

Brompton European

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brompton European is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

UnitedHealth Group CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UnitedHealth Group CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, UnitedHealth Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brompton European and UnitedHealth Group

The main advantage of trading using opposite Brompton European and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton European position performs unexpectedly, UnitedHealth Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in UnitedHealth Group will offset losses from the drop in UnitedHealth Group's long position.

The idea behind Brompton European Dividend and UnitedHealth Group CDR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.